Singapore a test-bed for yuan products

Singapore a test-bed for yuan products
By Linette Lim | Posted: 15 March 2013 2218 hrs
     
SINGAPORE: Singapore's financial sector can be a test-bed for new yuan-linked products, according to Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam who spoke at a banking industry forum on Friday.

The forum organised by the Financial Markets Association (ACI) was attended by over 700 delegates.

For instance, Mr Tharman said banks in Singapore can explore how to encourage offshore RMB bond issuance in Singapore with longer maturity tenors and different issuer profiles.

As the fourth largest foreign exchange trading centre in the world, Singapore can play an important role in integrating both the offshore yuan and Asian local currency markets.

This could be done through carrying out or booking trades in yuan or by developing yuan investment products.

He said: "While the US dollar will remain an integral global settlement currency, the renminbi (RMB) is likely to be increasingly used for trade denomination and contract pricing. As the (offshore RMB) market grows in multiple jurisdictions, regulators and market participants will have to work together to avoid fragmenting liquidity across markets and to promote efficiency in the offshore renminbi market."

While the yuan becomes increasingly important as a diversification currency for central banks and for trade among companies, the US dollar is seeing a gradual decline as an international reserve currency.

Still, experts said the dollar is likely to strengthen against other major currencies in the short to medium term.

Vice chairman of Blackrock, Philipp Hildebrand said: "Of course, we still have a current account deficit, but depending on what happens on the energy front, you can easily imagine the US moving into a current account surplus for the first time in decades, within a couple of years from now. Again that should be broadly supportive of the dollar."

So far, the US recovery is seen to be the firmest among the developed economies.

This could help reverse a long-term depreciation trend in the greenback that's been brought about by loose monetary policy.

Experts said out of the four major central banks, the Fed is most likely to discontinue monetary easing.

This could see global interest rates edging higher over the next few years.

- CNA/ck

- wong chee tat :)